Porsche poised to be in VW driving seat

Porsche, the German sports carmaker, is poised to seize full control of Volkswagen after taking its holding in Europe's biggest motor manufacturer close to 75%.

Stuttgart-based Porsche said yesterday it had raised its direct stake in VW this month from 35.2% to 42.6% and had options on a further 31.5%.

Depending on the global economic situation, it intended to lift its stake to above 75% in 2009, freeing the way for a "domination agreement" under German corporate law.

Porsche, dwarfed by its takeover target, said it would cross the 50% hurdle in the coming weeks. It made its move as the European commission prepares to take Germany to court over its refusal to remove a 20% blocking minority in VW held on behalf of the state by Lower Saxony. The EC decision, to be announced by internal market commissioner Charlie McCreevy this week, is the latest stage in a long-running dispute between Brussels and Berlin over the 1960 "VW law" struck down by the European court of justice just over a year ago.

Germany's revised law still hands Lower Saxony, home of VW's headquarters, a 20% vote even though the country's corporate law normally fixes any blocking minority at 25%. The chancellor, Angela Merkel, told 30,000 VW workers last month she would fight to uphold the veto but her government could face fines of tens of millions of euros if it defies the court. Porsche has sided with the EC.

The sports carmaker, the world's most profitable motor firm thanks to options trading, has built up its stake in VW partly through abortive "short selling" in Volkswagen stock by hedge funds. As the funds were forced to unwind their positions, VW's share price rose sharply.